Thu Jun 13

A year after the PwC scandal, the furore is gone – as well as any real appetite for structural change

Written by Carl Rhodes, Professor of Organization Studies, University of Technology Sydney

It was a scandal ^[1] that rocked the shaky foundations of Australia’s trust in big business early last year.

Management consulting giant PwC had worked with the federal government to develop plans to curb corporate tax avoidance. Then it leaked those plans to corporations who would want to circumvent them.

Heads rolled in the aftermath. PwC Chief Executive Tom Seymour resigned, along with a number of board members. Politicians railed against the betrayal, bringing the entire consulting sector under intense public scrutiny.

In March 2023, the Senate kicked off a formal inquiry to figure out what could be done to make sure this did not happen again. And this week, the inquiry’s much-awaited final report ^[2] was released.

Senator Richard Colbeck, who chaired the committee, said ^[3]:

The evidence provided to the committee in this inquiry has convinced the committee that decisive action is required.

Strong words, but just how decisive are the committee’s actual recommendations?

The report’s 12 recommendations were mostly concerned with what government should do differently.

Recommendations, but mostly for the government

The inquiry recommended better training for Department of Finance officials tasked with procuring consultants, and giving key documents – the Contract Management Guide and Supplier Code of Conduct – a makeover.

It also recommended improving the tendering system and developing a central register for conflicts of interest.

Other suggestions included reviewing the laws covering large partnerships and creating a new parliamentary standing committee to review and approve consulting contracts.

Liberal Senator Richard Colbeck chaired the committee. Lukas Coch/AAP ^[4]

The recommendations have been designed to enhance the capability of the Australian public service, increase transparency about government use of consultants, establish regulation and integrity assurance, and ensure that parliament oversees any significant expenditures on consulting.

PwC itself was implored to “be open and honest with the Australian Parliament and people” about its wrongdoings. More broadly, the report recommended organisations that regulate their own professional standards independently of government be required to report on those standards annually.

All the recommendations appear entirely reasonable in and of themselves. But are such steps really enough to address the egregious corporate behaviour that got us into this mess?

The outrage might be subsiding

In early 2023 when the scandal first broke, Australian politicians lashed out at the company with vitriol.

Labor Senator Deborah O’Neill condemned the firm’s conduct as “deception and betrayal ^[5]”, telling Parliament:

This is a major cancer on the way that information that is vital to the national interest is being undertaken by those at PwC.

Treasurer Jim Chalmers called for ^[6] “the biggest crackdown on tax adviser misconduct in Australian history”.

Even PwC conceded it had “betrayed the trust of our stakeholders ^[7]”.

More than a year has passed since PwC hit the headlines. If this Senate report is anything to go by, the hot-under-the-collar furore of 2023 seems to have cooled.Self-regulation and greater government oversight of consulting expenditures seem to be the main upshots.

PwC offered little commitment, however, when commenting ^[8] on the report’s release, saying it would “consider” its contents. That’s hardly an overhaul.

The fundamental problem has been obscured

The report makes a softly-softly set of suggestions to address the specific problems that might arise from government’s over-reliance on and lack of control over management consultants.

But do the recommendations hide a much more fundamental problem underscored by the PwC scandal?

Greens Senator Barbara Pocock, whose initial commentary on the scandal was central to establishing the inquiry, expressed dismay ^[9] at the report’s restraint, saying the “modest recommendations” were inadequate.

The Greens want to

ban rule-breaking firms from gaining government contracts
ban consulting firms from making political donations
cut departmental spending on consultants.

According to the Australian Financial Review ^[10], these suggestions are “unlikely to gain traction politically”.

So, is the report the final say on the PwC scandal? Now that the inquiry is over, should we all just move on?

If anything, Pocock’s response underestimates the deeper problems that the scandal reflects.

Underlying the scandal is a rapacious approach to business ^[11] that has infiltrated the Australian corporate sector more broadly. We need real change and a debate about whether business is best serving Australia.

Significant change would be slow, but, with bold political imagination, possible.

The tax leaks scandal offered us an opportunity to ask hard questions about the role of business in Australian society and the culture in big business that places profits above all else.

The report performed a useful service, but questions remain unanswered.